What is Structural Unemployment?

Employment issues arising as a result of a mismatch between employers' needs and the skills required for the job is termed as structural unemployment. Let's get acquainted with it in detail.
Those studying economics must have come across the term structural unemployment quite often, in reference to the discrepancy between the needs and requirements of the employers and the proficiencies of the workforce. Even though the number of job vacancies may be greater than the number of unemployed, it is not always possible for them to have the required skills for the jobs that are available. This usually occurs due to a fundamental shift in the economy. A good example is that of the exodus of manufacturing jobs from the US to China over the past few years due to cost benefits. While there are a number of questions surrounding the term, let's understand its causes first.

Causes

Some degree of mismatch between the work force mainly in terms of specialization, location, skills, etc., and the demand for labor is possible in many cases. Even though, this adjustment does take place, but it could take years and may need some radical changes in the economy.

There are a number of ways by which economic life and the labor market interact in their own structured manner, for example, by public institutions, with the help of a regulatory framework, and by real and actual usage. One of the prime causes is the failure of labor organizations in defining pay-scale bargaining methods and approaches. What's more, the persistent change in requirements, resources, and technology within the market economies leads to increased number of jobs in a single sector, while reducing the same in the other. As a result, it is not always possible for workers to shift from where jobs are reducing to places where jobs are available in surplus. The ones who are structurally unemployed do not take up jobs for long, and hence, it becomes all the more difficult for them to be a part of secure employment.

Ways to Reduce Structural Unemployment

The inability of labor to adjust with the kind of employment they are in could lead to perilous long-term unemployment. With time, they might become even more undesirable for the jobs they were, at once, the most sought after.
  • To start with, enhancement in the employability of labor supply will help the unemployed to possess the correct skills required for the occupations in demand.
  • With the help of tax reforms and benefits system, there should be an enhancement in the people's incentives to look for paid jobs.
  • Significant reduction in geographical fixedness could help in reducing the need for additional training programs, as in this case, it would be easier for the worker to move to an area where his skills are in high demand.
  • The government can contribute to developing skills in places where unemployment is very high. This can be done through providing grants and incentives to agencies that can train people on various vocational and soft skills.
While economic change and globalization have persistently actioned towards increasing structural unemployment, governmental protectionism and retraining incentives are some of the ways to reduce it. The higher the rate of employment, the better it is for the economy and the well-being of the people.